What is a chargeback fee? 2026 guide for Singapore merchants

Key Takeaways:

• Chargeback fees are charged per dispute, and you pay them whether you win or lose the dispute.

• The most effective way to reduce chargeback fees is to prevent the disputes from happening in the first place, through fraud controls, clear communication, and fast customer support.

• Airwallex's built-in fraud detection, real-time dispute alerts, and dispute management tools help online merchants stay on top of chargebacks before they escalate into costly fees.

A chargeback fee is a penalty your payment processor charges every time a customer successfully disputes a transaction and the bank reverses the payment.

For merchants operating in Singapore, chargebacks can erode your margins, damage your standing with payment processors, and consume hours of operational time.

This guide explains what chargeback fees are, how the dispute process works, what causes chargebacks, what they actually cost in 2026, and the concrete steps you can take to reduce them.

What is a chargeback fee?

A chargeback fee is a fee your acquiring bank or payment processor charges when a customer disputes a transaction and the payment is reversed. It covers the administrative work involved in handling the dispute.

A few things to know:

• You usually pay per chargeback. The fee is charged each time a customer disputes a transaction, whether you win or lose the dispute.

• The fee varies. Chargeback fees typically range from S$15 to S$100 per incident for merchants with a standard risk profile.¹ The amount depends on your processor, industry and chargeback history. High-risk merchants may face higher fees.

• You can lose more than the fee. When a chargeback is approved, you generally lose the original transaction amount as well as the chargeback fee. This makes a chargeback more costly than a standard refund.

• You can challenge a chargeback. If you have evidence that the transaction was legitimate, you can submit it to challenge the dispute. This process is called representment. Merchants win around 20–30% of chargebacks on average, while strong preparation can push win rates above 70%.²

• Check your processor's terms. Some processors charge an additional fee if you challenge a dispute and lose, so check the costs before deciding whether to fight the chargeback or accept it.

What is the chargeback process?

Chargebacks are designed to protect consumers when they believe a card transaction was fraudulent, incorrect or otherwise problematic.

The process typically involves three parties: the customer's card-issuing bank, your acquiring bank (the bank that processes card payments for your business), and you, the merchant.

Here's how a typical chargeback works:

Step 1: Customer disputes the transaction

The customer contacts their card-issuing bank to dispute a charge. Common reasons include an unauthorised purchase, goods that were not delivered, damaged items, or a transaction the customer does not recognise.

Step 2: Issuing bank reviews the claim

The issuing bank reviews the customer's claim. If it meets the criteria for a chargeback, the bank initiates the process and temporarily credits the disputed amount back to the customer's account.

Step 3: Your acquiring bank notifies you

The issuing bank sends the chargeback through the card network to your acquiring bank. Your acquiring bank then notifies you of the dispute and typically deducts the disputed amount and chargeback fee from your account or a future settlement.

Step 4: You decide whether to accept or challenge it

You can accept the chargeback, or challenge it by submitting evidence that supports the transaction. This might include order confirmations, delivery records, refund policies, or communications with the customer.

This process is called representment. Your deadline to respond is usually between 7 and 30 days, depending on the card network and your payment processor.

Step 5: The evidence is reviewed

The card issuer reviews the evidence you submit and may ask you or the customer for additional information.

Step 6: A final decision is made

The card issuer makes a decision based on the available evidence. If the chargeback is reversed in your favour, the disputed funds are returned to you.

Whether the chargeback fee is also refunded depends on your acquiring bank or processor's terms. Some providers keep the fee even when you successfully challenge the chargeback.

What are the causes of chargebacks?

Chargebacks can happen for several reasons, and not all of them involve fraud. Most disputes fall into five broad categories; here’s a quick overview:

True fraud

True fraud occurs when someone uses stolen card details to make a purchase without the cardholder's authorisation. When the legitimate cardholder spots the transaction and disputes it, a chargeback may follow.

For the merchant, the loss can include the original transaction amount and the chargeback fee. Depending on the payment processor and the merchant's fraud levels, consistently high fraud rates can also lead to additional monitoring or other consequences.

Friendly fraud

Friendly fraud happens when a customer disputes a transaction they actually authorised.

This can be accidental, such as when the customer does not recognise your business name on their statement or has forgotten about the purchase. It can also be deliberate, such as when a customer disputes a purchase to get their money back without returning the goods.

According to Javelin Strategy & Research, friendly fraud accounts for around 20% of disputes.¹¹

Merchant error

A chargeback does not always mean someone has committed fraud. Mistakes on the merchant's side can also lead to disputes.

Common examples include:

• Charging a customer twice for the same transaction

• Shipping the wrong item

• Failing to deliver an order

• Not providing a service within the promised timeframe

• Not issuing an agreed refund

Clear order records, accurate fulfilment and responsive customer support can help prevent these disputes.

Processing errors

Technical problems can also result in a customer being charged incorrectly. For example, a payment might be processed twice, charged for the wrong amount, or appear to go through when the customer did not expect it.

These disputes can often be reduced by having reliable payment systems and checking how failed or duplicated transactions are handled.

Dissatisfaction with goods or services

A customer who is unhappy with a purchase may contact the merchant first to resolve the issue. If they cannot get a satisfactory resolution, they may instead dispute the transaction through their bank.

Clear product descriptions, realistic delivery estimates, straightforward refund policies and accessible customer support can help reduce this type of chargeback.

How to avoid chargeback fees

The best way to reduce chargeback fees is to prevent avoidable disputes from happening in the first place. Here are a few ways of doing that:

Verify the cardholder to prevent fraud

When processing online payments, use security measures that help confirm the person making the purchase is the legitimate cardholder:

• Address Verification Service (AVS) checks whether the billing address provided by the customer matches the address on file with their issuing bank.

• Card Verification Value (CVV) checks the security code on the card, helping to confirm that the person making the purchase has access to the card itself.

You can also enable 3D Secure (3DS), which adds an authentication step at checkout where the customer verifies the payment with their card issuer.

When 3DS authentication is successfully completed, liability for certain fraudulent transactions can shift from the merchant to the card issuer, depending on the card network's rules.

Keep inventory accurate to prevent fulfilment disputes

Some chargebacks happen because an order cannot be fulfilled as promised. For example, a customer might receive the wrong item, or buy a product that was actually out of stock.

Keep your inventory updated so your website reflects what is available. If your systems support real-time inventory updates, use them to reduce overselling and the disputes that can follow.

Communicate clearly at every stage

Clear communication can prevent disputes caused by confusion or misunderstandings.

Start with a recognisable billing descriptor, which is the name that appears on the customer's bank statement. If this differs from your trading name, customers may not recognise the transaction and assume it is fraudulent.

You should also:

• Give realistic shipping estimates and provide order tracking where possible.

• Make your returns and refunds policy easy to find, including eligibility, the process and expected timelines.

• Keep customers updated if an order is delayed or something changes.

• Make customer support easy to reach so customers have a way to resolve problems directly with you before going to their bank.

Respond to disputes quickly and professionally

Once a dispute has been filed, respond promptly and provide clear evidence to support your case. This might include order confirmations, delivery records and customer communications.

Check the deadline set by your payment processor and submit your response in time. Many payment service providers also offer tools to help merchants manage disputes.

Airwallex, for example, provides a disputes dashboard where merchants can view transaction details, track cases and take action from one place.

Chargeback fees and costs

A chargeback can cost more than the fee charged for the dispute itself. You may also lose the original transaction amount, the goods or services you provided, and the time your team spends handling the case.

Direct costs

The most obvious cost is the chargeback fee charged by your acquiring bank or payment processor. Here’s how chargeback fees compare across several widely used processors:

Fee amounts shown apply to US-dollar transactions. Fees in other settlement currencies may differ. Check with your processor for the latest rates and terms.

You can also lose the original transaction amount if the chargeback is upheld. For a physical product, you may lose the payment without recovering the goods, creating an additional cost.

Note that the total cost can be higher once you factor in the time spent handling disputes.

Research by Javelin Strategy & Research estimates the average all-in cost of a chargeback at around US$128 per incident, including third-party fees and internal labour.⁴

Hidden costs

The fee on your statement is only part of the picture. Chargebacks can also create:

• Operational costs: Your team spends time finding transaction records, gathering evidence and responding to disputes.

• Lost merchandise: If a physical product has already been shipped, you may lose both the product and the payment when a chargeback is upheld.

• Additional fees: Some processors charge extra fees for certain dispute-related services or for challenging a case.

• Higher processing costs: A consistently high dispute rate can affect how a processor assesses your business, potentially leading to higher costs or additional requirements.

Card network monitoring programmes

High chargeback rates can also trigger monitoring by the card networks. Visa and Mastercard both have programmes for merchants with excessive dispute levels, although the thresholds, calculations and consequences differ between the networks and can change over time.

For this reason, merchants should monitor their chargeback ratio rather than waiting until they receive a warning from their processor or card network. If your dispute rate approaches a network's programme threshold, you may face additional requirements, fees or other remediation measures.

The exact threshold that applies to your business depends on the relevant card network, programme and market. Check the current requirements with your acquiring bank or payment processor rather than relying on a single percentage as a universal limit.

Reduce chargeback fees and protect your finances with Airwallex

Managing disputes can take time, especially when your team has to identify risky transactions, gather evidence and respond to cases manually. Airwallex provides tools to help prevent fraudulent payments and manage eligible disputes before they become full chargebacks.

Pro-active fraud detection

Airwallex's fraud engine screens and scores transactions in real time, using AI-powered risk models and rules to determine whether to allow, challenge or block a payment during processing. Fraud Attack Prevention runs automatically for all accounts and can detect and block coordinated fraud attacks.

3D Secure authentication

Airwallex also supports 3D Secure (3DS) authentication, which adds an extra verification step during checkout. When 3DS is successfully applied, liability for certain fraudulent disputes may shift to the cardholder's issuing bank, subject to the applicable card-scheme rules.

Pre-chargeback programmes

Airwallex supports Visa Rapid Dispute Resolution (RDR) and Mastercard Collaboration, which can resolve eligible disputes before they become full chargebacks. We determine enrolment based on factors such as your chargeback ratio, business profile and risk profile.

Frequently asked questions (FAQs)

What is a chargeback fee?

A chargeback fee is a penalty your acquiring bank or payment processor charges each time a customer successfully disputes a transaction and the bank reverses the payment. It typically ranges from $15 to $100+ per incident, and is charged on top of the refunded transaction amount.¹

Are chargeback fees refundable?

It depends on your processor. Some, like Shopify Payments, refund the chargeback fee if you win the dispute. Others, including PayPal, make it non-refundable regardless of the outcome. Check your processor's terms before deciding whether to challenge a dispute.

What is the difference between a chargeback and a refund?

A refund is processed voluntarily by you, the merchant. A chargeback is initiated by the customer's bank, without your involvement. Refunds do not carry a penalty fee. Chargebacks do, and they can also affect your chargeback ratio, which card networks monitor closely.

Can merchants dispute chargebacks?

Yes. If you believe a chargeback is unjustified, you can challenge it by submitting evidence to your acquiring bank — a process called representment. Evidence can include order confirmations, delivery records, and customer communications. Merchants who fight chargebacks with strong evidence win around 20–30% of cases on average, with that rate rising above 70% with thorough preparation.²

What is a healthy chargeback ratio?

Aim to keep your chargeback ratio below 0.65%. Both Visa and Mastercard operate monitoring programmes that impose additional fines on merchants who exceed their respective thresholds, and staying below 0.65% keeps you clear of both.⁵

How long does a chargeback take to resolve?

The timeline varies by card network and processor. After a dispute is filed, you typically have 7 to 30 days to submit your evidence. The issuing bank then reviews the case, which can take several weeks. The full process from dispute filing to final decision can take anywhere from 30 to 120 days.

Sources:

1. justt.ai/blog/merchant-chargeback-fee

2. justt.ai/blog/merchant-chargeback-rights

3. chargebacks911.com/chargeback-management/chargeback-fees/how-much-is-a-chargeback-fee

4. chargeback.io/blog/chargeback-statistics

5. chargeback.io/blog/chargeback-threshold-limits